Key Facts to Know Before Buying

Before you buy any insurance plan to protect your income or your loan repayments, there are some general conditions that you need to meet.

• You must be actively employed for at least 16 hours per week.
• You must be aged 18 to 65 (higher in some circumstances).
• You must not be employed in any temporary, casual or seasonal work.
• You must not be aware of any circumstances that may result in you becoming unemployed.
• You must not be in dispute or in the course of any disciplinary action with your employer.

Exclusions

• Policies will not usually cover unemployment occurring within an initial period of time (2-4 months) following the purchase of the plan.
• Policies will usually exclude claims arising from pre-existing medical conditions that you are aware of when the policy was purchased. If you consulted a doctor about a medical condition during a specified period immediately before the start date of the policy, this condition will also be excluded.
• Claims that result from your own actions as a result of drug or alcohol abuse will not be covered.

Length of Term

Make sure you choose a policy that gives you an appropriate length of benefit payment. Most policies will pay for 12-24 months, whereas a Permanent Health Insurance (PHI) policy will continue to pay benefits until you reach retirement age.

Deferral Periods

This details the time that you must be away from work, due to illness or disability before the benefits under the policy may be claimed, and may range between 1 day and 12 months. In general; the longer the deferral period, the lower the premiums.

Make sure that the length of deferral period within your plan is appropriate to your circumstances. If you are employed, your employer may pay your normal income during the early months of a long term illness, and so you can afford to set a deferral period appropriate to this timing. However, if you are self-employed, you will probably need to set a much shorter limit.

Levels of Disability

Make sure you check what the insurance company means by disability; there are a number of definitions related to the activities you are able to carry out:

1. Own Occupation
You will be able to claim if your incapacity prevents you from following your own occupation.

2. Any Suited Occupation
You will not be able to claim unless you are too ill to carry out your own occupation, or any other occupation to which you are suited, as defined in your policy.

3. Any Occupation
You will not be able to claim unless you are too ill to carry out ANY job whatsoever.

It is usually better to choose a plan that pays the benefit if you are unable to carry out your usual occupation. It is far less likely you will be unable to do any work, than you are unable to continue your usual occupation.

Some policies may impose even stricter definitions of activity before you can make a claim:

4. Activities of Daily Working
You will not be able to claim unless you are unable to carry out a selection of work-related tasks, such as walking, communicating and exercising manual dexterity.

5. Activities of Daily Living
You will not be able to claim unless you are unable to carry out a selection of everyday tasks, such as washing and dressing yourself.

Levels of Benefit

Some policies may offer index-linked benefits. This means that during the term of the policy, the level of cover increases in line with one of the following criteria:

• Any raise in your salary
• A chosen index
• General inflation

Premium levels will usually increase by a similar rate.

Premiums

Look for the term 'Waiver of Premium'. This means that your premiums will be suspended throughout the duration of any claim. However, the policy will continue to be active; if you return to work the policy, and the protection available from it, will be reactivated.

You may also want to see if the policy offers fixed premiums. The premium levels will be fixed at the start of the plan, and remain the constant throughout the whole of the policy's term.